By Harriet Lefton
Advanced Micro Devices, Inc. (NASDAQ:AMD) shares are dipping right now. Prices are down from $12.90 on June 8 to their current share price of $12.09 following a bearish Goldman Sachs report, and look even lower on a three-month basis due to post-earnings blues. In general tech stocks are experiencing a bit of a correction in the last few days. Canaccord Genuity analyst Tony Dwyer says “While we do believe the market could see a choppy period as the (info tech) leadership corrects, we urge investors to use any weakness as an opportunity to add exposure.” This is particularly true for AMD.
Here are 5 reasons why a buy on the dip looks very appealing for AMD right now, with several exciting developments round the corner:
- The Breakthrough Epyc – AMD’s upcoming server chip, the Epyc, is generating a lot of hype. It is the first truly competitive product in the server market that AMD has come up with in the last few years and- if the performance stats prove to be true- then AMD is about to make a serious comeback. The Epyc, which is due to begin rollout on June 20, should have 45% more cores, 60% more input/output capacity and 122% more bandwidth memory than the competition. The chip is revolutionary in its single-socket focus made possible by the huge number of cores, although a dual-socket option will also be available. And even more excitingly, AMD claims their chips can reduce the costs of owning data center servers by an impressive 30%. The key point is that AMD has a lot to gain, versus Intel which only has market share to lose.
- Threadripper vs Intel– the Threadripper is AMD’s brand new 16-core 32-thread processor that is being slated as competition for Intel’s own high-end desktop CPUs known as the Core X. The key difference between the two offerings, especially from AMD’s side, should be the price. While Intel’s Core may beat on performance the price comes in high at around $2,000. Rumors in the market suggest the Threadripper could retail for as little as $1,000- making it a very competitive choice. Even Intel’s upcoming 16 core i9 processor is still expected to cost about $1,700. Conclusion: the Threadripper seems safe and could even force Intel to reduce its own prices or sacrifice market share and maintain margins. Either way the competition is set to get heated here.
- Vega GPU’s AI potential – AMD is gearing up for the launch of its high-end Radeon RX Vega GPU. The Vega, due this quarter, apparently shapes up very well against Nvidia’s equivalent offering, the GeForce GPU. Most notably, the Vega has a much faster floating point performance (i.e. number crunching), texture mapping units and pixel shading than the GeForce. But the truly interesting part about the Vega is that AMD want it to be more than just a gaming or graphics tool- it is also being hyped as an artificial intelligence (AI) disruptor. Good news because AI is set to see huge growth going forward- with many expecting AI to be behind the tech of the future (for example, driverless cars). Indeed, Statista says the AI market could reach an incredible $36.8 billion in 2025 up from well under $1 billion in 2016. A market that size easily has room for both AMD and Nvidia- which is also pushing fast into the AI space.
- The Apple Connection– AMD got a boost when Apple announced that the iMac Pro, its most powerful computer yet, will feature the Radeon Vega card. The $4999 iMac Pro, unveiled at the WWDC 2017 in California, is expected to launch in December. And it’s not just Apple, HP has also just revealed that it will offer its customers the choice between Intel’s Core i and AMD Ryzen processors for its Omen gaming computers.
- Ryzen Explosion– in case you forgot, by the end of this quarter the five major OEM PC suppliers will all provide a Ryzen-powered computer. The increase in availability of the Ryzen can only assist it in stealing some of Intel’s market share here. AMD also has Ryzen Mobile in the pipeline (for 2H17) which AMD says will give a “phenomenal” gaming experience on a “thin-and-light notebook”. Next year AMD could also launch Ryzen CPUs for the commercial market next year. Watch this space.
What is the Street saying?
We think the Street is still too cautious. In terms of the general outlook on the stock, TipRanks reveals that AMD has a hold market consensus rating with 6 buy, 9 hold and 3 sell ratings published on the stock in the last three months. The average analyst price target of $11.67 now stands at -3.47% downside from the current share price- although the very wide range of price targets on AMD should be noted from $17 on the high to $4 on the low.